deferred revenue expenditure is which asset

A deferred expense is a cost that has already been incurred, but which has not yet been consumed. It will be easier to understand the meaning of deferred revenue expenditure if you know the word deferred. Deferred expenditure refers to expenses incurred which do not apply to the current accounting period. In the Balance Sheet of 2015-2016 Rs.9000 will be treated as Prepaid Insurance, a current asset. Examples. Deferred Revenue Expenditure: - In some cases, the benefit of a revenue expenditure may be available for period of two or three or even more years. Thus, the Company reports it as a deferred revenue a liability than an asset until the time it delivers the products and services. What is a deferred expense? If the revenue expenditure is treated as deferred and is added to fixed assets, it is not being charged to the P&L and no deduction from profits is allowed at the outset (nor can AIAs be claimed as it is not capital expenditure). Which means “Holding something back for a later time”. Part of the amount is shown in profit and loss account and is reduced from total expenditure and rest is shown in balance sheet. Definition of Deferred Expense. What is a Deferred Expense? The Concept of Accounting explains the type of Deferred Revenue Expenditure is added. A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods.To accomplish this, the deferred expense is reported on the balance sheet as an asset or a contra liability until it is moved from the balance sheet to the income statement as an expense. These expenditure does not result in an asset creation. Item such as preliminary expenses, cost of issue of debentures are examples that may be classified under this head. It is also called as unearned revenue or deferred income. The remaining portion of the expenditure is carried forward and is known as capital expenditure or or deferred revenue expenditure and is shown as an asset in the balance sheet. In some cases, the benefit of revenue expenditure may be available for a period of two or three or even more years. Deferred Revenue Expenditure. While revenue expenditure is a simple concept, deferred revenue expenditure is slightly more complicated. A good example is that of a magazine subscription business where this revenue is a part of the business. Deferred Revenue and Expenditure – Asset and Liability Method. Deferred Revenue expenditure are usually large in amount and benefits are not consumed within the same accounting period. Such expenditure is then known as "Deferred Revenue Expenditure" and is written off over a period of a few years and … Certain expenses though of revenue nature but likely to give benefit for more than one accounting year are treated as Deferred Revenue Expenditure like Advertisement expenses. Exceptions to General rules: There are two methods of recording revenue and expenditure deferrals, this first is the asset and liability method shown immediately below, and the second is the revenue and expenses method detailed later in this post. More years of 2015-2016 Rs.9000 will be treated as Prepaid Insurance, a current asset revenue! You know the word deferred more complicated of deferred revenue expenditure is slightly more complicated of deferred revenue a than... Current asset of the amount is shown in profit and loss account is... Incurred which do not apply to the current accounting period consumed within the same accounting period such as preliminary,! 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